Anti-Obamacare Crusade Risks Economic Disaster

The crazy wing of the Republican Party finally got what it wanted. The federal government has been shut down for the first time in nearly 18 years because the GOP refused to approve further government funding unless the Patient Protection and Affordable Care Act (aka Obamacare) is also substantially repealed.

President Barack Obama accuses the Republican Party of being on an "ideological crusade," and he's right. The Republicans' insistence on tying any budget deal to significant changes to the health care law is ignorant of political reality: The law has survived 42 separate votes by the Republican-controlled House of Representatives and numerous court challenges.

These Republican tactics are also costly. The government shutdown is hurting federal employees, citizens who depend on them and firms that do business with the government. And the damage to the creditworthiness of the U.S. government will make it more expensive for the Treasury to borrow.

Republicans should take a lesson from history, which has shown time and time again that such ideological crusades, when applied to economic policy, can have disastrous consequences.

Consider the Irish famine, one of the worst humanitarian disasters of the 19th century, which left roughly 1 million people — or about one-ninth of Ireland's population — dead and led an even larger number to emigrate.

The facts of the famine are well known. In the autumn of 1845, a fungus reached Ireland and devastated its potato crop. The blight returned in several subsequent years and, because of the crucial role of potatoes in the Irish diet, led to mass starvation and exodus.

What is less well known is that Britain's unflinching fidelity to an economic ideology was largely responsible for the massive proportions of this tragedy.

Britain's prime minister at the outbreak of the crisis, the Conservative Party's Sir Robert Peel, immediately took steps to alleviate Irish suffering: sending experts to study the fungus, promising to provide any chemical that would combat it at government expense and arranging — without Parliamentary authorization — a large shipment of corn from the United States to stave off the worst effects of the crisis. Peel also undertook the politically dangerous task of repealing the Corn Laws, a longstanding and substantial tariff on imported grain, in order to make food cheaper.

Peel's repeal of the Corn Laws helped Ireland's poor by lowering the price of imported grain but was unpopular with the landed aristocracy, farm owners who preferred high grain prices and were the mainstay of the Conservative Party. By repealing the tariff, Peel alleviated the famine but alienated his party's political base, which cost him his job.

Peel's replacement, the Liberal Party's Lord John Russell, was adamantly opposed to any government interference with the workings of the grain market: Thus, while supporting the repeal of the Corn Laws, Russell opposed Peel's other actions, notably importing grain from the United States. Commenting on Peel's response to the famine, Russell wrote: "It must be thoroughly understood that we cannot feed the people. It was a cruel delusion to pretend to do so."

Russell was the leader of the world's wealthiest industrial democracy of the day, and yet his ideological commitment to not intervening in markets led him to spurn policies that were proven lifesavers. Can we imagine even the most pro-free market political leader today sacrificing lives to demonstrate his or her loyalty to an economic ideology?

Sadly, the response to the Irish famine is not the only example — historical or contemporary — of an ideologically based policy that had tragic consequences.

The heavy, ideologically based demands made by the Allies on Germany after World War I contributed to that country's descent into economic instability that ended with the rise of the Nazis.

Japan's refusal to confront its ailing banks in the 1990s — despite numerous warnings of impending disaster — led to a "lost decade" characterized by slow economic growth, high unemployment and a long, costly cleanup of its financial system.

The Bush administration's ideological commitment to cutting taxes, despite the increased fiscal demands of the wars in Iraq and Afghanistan, was largely responsible for the boom-bust business cycle that ended with America's subprime meltdown.

In these and other cases, economic policy-makers got it horribly wrong when they took their cues from ideology rather than cold, hard economic analysis. This is a lesson that the Republicans should take to heart.

Richard S. Grossman is a professor of economics at Wesleyan University and a visiting scholar at the Institute for Quantitative Social Science, Harvard University. His book, "Wrong: Nine Economic Policy Disasters and What We Can Learn from Them," will be published in November by Oxford University Press.

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